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Chapter 44
Operating Segments

Chapter 44: Multiple choice – Computational (SET B) – (For classroom instruction

purposes)
Quantitative thresholds
1. DEMENTED INSANE Co. is preparing its year-end financial statements and has identified
the following operating segments:
Segment
s Revenues Profit (loss) Assets
A 4,000,000 800,000 56,000,000
B 4,800,000 560,000 72,000,000
C 1,080,000 (280,000) 48,000,000
D 960,000 (2,800,000) 4,000,000
E 1,160,000 200,000 5,600,000
Totals 12,000,000 (1,520,000) 185,600,000

What are the reportable segments?

a. A, B and D b. A, B, C and D c. A and B d. A, B, C, D and E

Management approach and Aggregation

2. EMBOSOM CHERISH Co. engages in five diversified operations namely, operations A, B, C,
D, and E. Information on these segments are shown below:
Segment
s Revenues Profit (loss) Assets
A 3,200 800 40,000
B 3,200 400 8,000
C 200 40 4,000
D 600 80 8,000
E 800 280 24,000
Totals 8,000 1,600 84,000

Additional information:
a. For internal reporting purposes, segments A and B are considered as one operating
segment.
b. Segment E is considered as an operating segment for internal decision making purposes.
c. Segments C and D have similar economic characteristics and share a majority of the
aggregation criteria.

What are the reportable segments?

a. A, B, C, D and E

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b. A, B and E
c. A and B as one segment and E
d. A and B as one segment, E, and C and D as one segment

Limit on external revenue

3. SORDID DIRTY Co. is preparing its year-end financial statements and has identified the
following operating segments:
Segments Inter- Profit Assets
External segment Total
revenues revenues revenues
A 4,800,000 2,400,000 7,200,000 2,800,000 48,000,000
B 1,600,000 400,000 2,000,000 1,600,000 28,000,000
C 1,000,000 - 1,000,000 400,000 4,000,000
D 800,000 - 800,000 320,000 3,200,000
E 600,000 - 600,000 280,000 2,800,000
F 400,000 - 400,000 200,000 2,000,000
Totals 9,200,000 2,800,000 12,000,000 5,600,000 88,000,000

Management believes that between segments C, D, E and F, segment C is most relevant to

external users of financial statements.

What are the reportable segments?

a. A and B b. A, B, C and D c. A, B and C d. A, B, C, D, E and F

Major customers
4. RUSTIC RURAL Co. has the following information on its operating segments.
Inter-
External segment Total
Segments revenues revenues revenues Profit Assets
A 4,800,000 2,400,000 7,200,000 2,800,000 48,000,000
B 1,600,000 400,000 2,000,000 1,600,000 28,000,000
C 1,000,000 - 1,000,000 400,000 4,000,000
D 800,000 - 800,000 320,000 3,200,000
E 600,000 - 600,000 280,000 2,800,000
F 400,000 - 400,000 200,000 2,000,000
Totals 9,200,000 2,800,000 12,000,000 5,600,000 88,000,000

RUSTIC Co. shall provide disclosure for major customers if revenues from transactions with a
single external customer amount to how much?
a. 920,000 b. 280,000 c. 1,200,000 d. 560,000

The answers and solutions to the computational problems above

(Multiple choice – Computational (SET B) can be found in the
accompanying Teacher’s Manual.

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Chapter 44: Theory of Accounts Reviewer

1. Which of the following statements is incorrect?
a. A “management approach” is used in identifying operating segments.
b. A reportable operating segment is one which management uses in making decisions
about operating matters or results from aggregation of two or more segments and
qualify under any of the quantitative thresholds.
c. Even if an operating segment does not qualify in any of the quantitative thresholds,
such operating segment may still be reportable if management believes that
information about the segment would be useful to users of the financial statements.
d. Disclosures for major customer shall be provided if revenues from transactions with a
single external customer amount to 75% or more of the entity’s external revenues.

2. Operating segments that may be aggregated are those which exhibit similar economic
characteristics and are similar in the following, except
a. the nature of the products and services, their production processes, and distribution
methods
b. the type or class of customer for their products and services
c. their financial position, financial performance, and cash flows
d. regulatory environment

3. According to PFRS 8, the quantitative thresholds are

I. at least 10% of total revenues (external and internal),
II. at least 10% of the higher of total profits of segments reporting profits and total losses
of segments reporting losses, in absolute amount (i.e., disregarding negative amounts.
III. at least 10% of total assets (inclusive of intersegment receivables).
a. I only b. II only c. III only d. I, II and III

4. Disclosures for major customer shall be provided if revenues from transactions with a
single external customer amount to
a. 10% or more of the entity’s external revenues.
b. 10% or more of the entity’s external and internal revenues.
c. 75% or more of the entity’s external revenues.
d. 75% or more of the entity’s external and internal revenues.

5. For segment reporting, interest revenue and interest expense

a. are reported separately for each reportable segment
b. may be presented at net amount if the chief operating decision maker relies primarily
on net interest revenue to assess the performance of the segment
c. are not reported
d. a or b

6. OBLITERATE TO ERASE Co. included interest expense in its determination of segment

profit, which OBLITERATE's chief financial officer considered in determining the segment's
operating budget. OBLITERATE is required to report the segment's financial data under

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PFRS 8. Which of the following items should OBLITERATE disclose in reporting segment
data? (Item #1) Interest expense; (Item #2) Segment revenues
a. No, No b. No, Yes c. Yes, No d. Yes, Yes
(AICPA)

7. Which of the following statements is/(are) correct?

I. If an entity that is not required to apply PFRS 8 Operating Segments chooses to disclose
information about segments that does not comply with PFRS 8, it shall not describe the
information as segment information.
II. PFRS 8 does not require an entity to report information that is not prepared for
internal use if the necessary information is not available and the cost to develop it
would be excessive.
III. If a financial report contains both the consolidated financial statements of a parent
that is within the scope of PFRS 8 as well as the parent’s separate financial statements,
segment information is required only the consolidated financial statements.
IV. PFRS 8 requires an entity to report interest revenue separately from interest expense
for each reportable segment unless a majority of the segment’s revenues are from
interest and the chief operating decision maker relies primarily on net interest revenue
to assess the performance of the segment and to make decisions about resources to be
allocated to the segment. PAS 14, the predecessor of PFRS 8, did not require such
disclosure.
V. Generally, an operating segment has a segment manager who is directly accountable
to and maintains regular contact with the chief operating decision maker to discuss
operating activities, financial results, forecasts, or plans for the segment.
VI. The term “segment manager” identifies a function which should be a segment manager
with a specific title.
a. VI only b. I and II c. all except VI d. all of the statements

8. PFRS 8 aims to help users of financial statements

a. Better understand enterprise performance
b. Better assess its prospects for future net cash flows
c. Make more informed judgments about the entity as a whole
d. all of the choices

9. PFRS 8 is required to be applied by

a. entities whose equity securities are traded in a public market and those entities who
are in the process of filing its financial statements with a securities commission or
other regulatory organization for the purpose of issuing any class of instruments in a
public market
b. entities whose debt and equity securities are traded in a public market.
c. entities whose debt and equity securities are traded in a public market and those
entities who are in the process of filing its financial statements with a securities
commission or other regulatory organization for the purpose of issuing any class of
instruments in a public market
d. all entities regardless of whether their securities are being traded or not

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10. PFRS 8 Operating Segments is applied in

I. Separate or individual financial statements
II. Consolidated financial statements
a. I only b. I and II c. II only d. neither I nor II

11. Which of the following may not be considered as the chief operating decision maker of an
entity?
a. Chief Executive Officer (CEO) c. Chief Operating Officer (COO)
b. Executive Committee d. Shareholders

12. The following are required under PFRS 8 Operating Segments to disclose segment
information in its financial statements.
I. entities whose equity or debt securities are publicly traded
II. entities that are in the process of issuing equity or debt securities in public securities
markets
III. entities whose securities are not publicly traded or not in the process of issuing
securities to the public.
a. I and II b. I only c. II only d. None of these

13. A non-publicly listed entity may be required to comply with PFRS 8 Operating Segment if
a. the entity is a subsidiary whose parent is a listed entity or in the process of issuing
securities to the public even in the entity’s individual (separate) financial statements
b. the entity has a foreign operation
c. at least majority of its revenues comes from intercompany transactions
d. it discloses segment information in its general-purpose financial statements

14. In financial reporting for segments of a business enterprise, which of the following should
be taken into account in computing the amount of an industry segment's identifiable
assets?
(Item #1) Accumulated depreciation; (Item #2) Marketable securities valuation allowance
a. No, No b. No, Yes c. Yes, Yes d. Yes, No
(AICPA)

15. According to PFRS 8, how do firms identify reportable segments?

a. By geographic regions c. By industry classification
b. By product lines d. By designations used inside the firm

16. An entity shall report separately information about each operating segment that:
I. Management deems relevant to external users
II. Meets the quantitative thresholds
a. I b. I or II c. II d. neither I nor II

17. Operating segments may be aggregated if

a. they have similar economic characteristics
b. they have different economic characteristics
c. they have the same chief operating decision maker

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d. the entity has a matrix organization

18. Which of the following tests may be used to determine if an operating segment of an entity
is a reportable segment under the provision of PFRS 8 regarding quantitative thresholds?
a. Its revenue (both from external customers and internal segments) is equal to or
greater than 10 percent of total revenue (external and external).
b. The absolute value of its operating profit or loss is equal to or greater than 10 percent
of the higher of the total of the operating profit for all segments that reported profits
and the total of the losses for all segments that reported losses.
c. The segment contains 10 percent or more of the combined assets of all operating
segments.
d. All of the above.

19. SUBJUGATE CONQUER Corporation sells 5 different types of products. The company is
divided for internal reporting purposes into 5 different divisions based on these 5 different
product lines. The company should prepare the note disclosure for disaggregated
information based upon
a. the 5 types of products.
b. the 5 different divisions.
c. the materialty of each product line based on the revenue or operating profits
generated by each product line or the assets utilized by each product line.
d. the geographic areas in which the 5 products are sold.
(Adapted)

20. Nonreportable segments should

a. be aggregated and reported as “all other segments.”
b. be aggregated but neither reported nor disclosed
c. not reported but may be disclosed if included in the necessary reconciliation of
segment assets, liabilities, or profit or loss
d. not reported but may be disclosed whether or not included in the necessary
reconciliation of segment assets, liabilities, or profit or loss

21. Total external revenue reported by operating segments should

a. at least be 75 per cent of the entity’s revenue
b. not be more than 75% of the entity’s revenue
c. at least be 90% of the entity’s revenue
d. no limit set by PFRS 8

22. If the total external revenue reported by operating segments does not meet the limit
provided under PFRS 8, additional operating segments shall be identified as reportable
segments until the limit is met. Other operating segments may be included as reportable
a. if they meet all of the quantitative thresholds
b. if they meet any of the quantitative thresholds
c. if they meet at least a majority of the quantitative thresholds
d. even if they do not meet any of the quantitative thresholds

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23. Which of the following is not required under current standards for disaggregated
information relating to geographic area information?
a. Revenues from external customers from the home country of the firm and from all
foreign countries in total.
b. The total of long-lived assets located in the firm's home country and located in foreign
countries.
c. Operating profits from external customers from the home country of the firm and from
all foreign countries in total.
d. Revenues for any foreign country for which the revenues from that country are
material to the firm.
(AICPA)

24. Entity-wide disclosures include disclosures about

(Item #1) Geographic areas; (Item #2) Allocated costs
a. Yes, Yes b. Yes, No c. No, Yes d. No, No
(AICPA)

25. Entity-wide disclosures are required by publicly held companies with

(Item #1) Only one reportable segment; (Item #2) More than one reportable segment
a. Yes, Yes b. Yes, No c. No, Yes d. No, No
(AICPA)

26. An entity must disclose all of the following about each reportable segment if the amounts
are used by the chief operating decision maker, except
a. Depreciation expense c. Interest expense
b. Allocated expenses d. Income tax expense.
(AICPA)
27. In financial reporting for segments of a business, an enterprise shall disclose all of the
following except
a. Types of products and services from which each reportable segment derives its
revenues.
b. The title of the chief operating decision maker of each reportable segment.
c. Factors used to identify the enterprises reportable segments.
d. The basis of measurement of segment profit or loss and segment assets.
(AICPA)

28. In financial reporting for segments of a business enterprise, segment data may be
aggregated
a. Before performing the 10% tests if a majority of the aggregation criteria are met.
b. If the segments do not meet the 10% tests but meet all of the aggregation criteria.
c. Before performing the 10% tests if all of the aggregation criteria are met.
d. If any one of the aggregation criteria are met.
(AICPA)

29. Under PFRS 8, the method used to determine what information to report for operating
segments is referred to as the

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a. Segment approach. c. Dramatic approach.

b. Friendly approach. d. Management approach.

30. FOLLY EVIL Co has two main classes of business: manufacturing of equipment and
servicing of equipment. These classes of business are divided into four divisions: heavy
equipment, light equipment, regular service contracts, and normal warranty. The
management receives segmental information based on these four divisions in its quarterly
internal reports. What should be the basis of FOLLY’s operating segment reporting for
purposes of PFRS 8?
a. The two main classes of business c. The risks and rewards
b. The four divisions d. The quantitative thresholds

31. DEMISE DEATH Corporation operates nationally. DEMISE has a single main product but
also produces different products from the sole production process. DEMISE’s internal
reporting is structured in to two: the main product and all other incidental products.
DEMISE proposed to disclose just one operating segment. Can the entity disclose just one
operating segment?
a. Yes, PFRS 8 allows an entity to disclose a single operating segment.
b. Yes, PFRS 8 allows an entity to disclose a single operating segment if no other
operating segments are identified using the “management approach” or no other
operating segments meet any of the quantitative thresholds under PFRS 8 or result
from aggregation.
c. No, PFRS 8 does not allow an entity to disclose just one segment. If there is only one
reportable segment then no segment information should be disclosed.
d. PFRS 8 is silent on this matter.

32. WISTFUL YEARNING Company established a new research and development division
during the year. The division will be financed internally as it will only incur costs but not
generate its own revenues. For internal reporting, this new division is considered a “cost
center.” WISTFUL has three other business segments: perishable goods, canned goods and
packaging. These segments will not receive any apparent benefits from the new division.
Will the new division be disclosed under PFRS 8 as a separate reportable segment?
a. The new division should be separately reported.
b. The new division should be aggregated with the packaging division.
c. The new division should be aggregated with either or both the perishable goods and
canned goods segment but not the packaging segment.
d. The new division it should not be separately reported or combined with the other
segments but rather included as part of the “all other segments” category.

33. An entity is in the entertainment industry and organizes outdoor concerts in four different
areas of the world: Europe, North America, Australasia, and Japan. The entity reports to
the board of directors on the basis of each of the four regions. The management accounts
show the profitability for each of the four regions, with allocations for that expenditure
which is difficult to directly charge to a region. The concerts are of two types: popular
music and classical music. What is the appropriate basis for segment reporting in this
entity?

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a. The segments should be reported by class of business, that is, popular and classical
music.
b. The segments should be reported by region, so Australasia and Japan would be
combined.
c. The segment information should be reported as North America and the rest of the
world.
d. Segment information should be reported for each of the four different regions.
(Adapted)

34. An entity has split its business segments on the basis of the law governing its different
types of business. Two business divisions that the entity has identified are insurance and
banking. Within the banking group, several different services are provided: retail banking,
merchant banking, and small business advisory service. The insurance entities sell travel
insurance, health insurance, and property insurance. The entity operates throughout the
world in several countries and continents. The operating results of each type of service are
regularly reviewed by the entity’s executive committee to make decisions about resources
to be allocated the type of service and assess their performance. What basis should the
entity report its segmental information?
a. On the basis of its business divisions.
b. By geographical location.
c. On the basis of the services it offers within those divisions.
d. The entity should just show one segment, entitled banking and insurance.
(Adapted)

35. An entity is engaged in the manufacturing industry and has recently purchased an 80%
holding in a small financial services group. This group does not meet any of the threshold
criteria for a reportable segment. Can the entity disclose the financial services group as a
separate business segment?
a. No, because it does not meet any of the PFRS criteria, it cannot be disclosed as a
separate segment.
b. Yes, even though it does not meet the PFRS criteria, an entity can disclose business
segments separately if they are a distinguishable component.
c. The entity can disclose only 80% of the results and net assets of the banking group.
d. Because of the disparity in types of business, the group should disclose its segmental
information on a geographical basis.
(Adapted)

36. An entity operates in the gas industry and has four different productive processes within
the production cycle. It is essentially a vertically integrated business. The entity proposes
to disclose segmental information regarding each of the four operations. Can the entity
disclose separately as business segments the four operations within the production cycle?
a. No, it must show a single segment covering all the various operations.
b. PFRS 8 says that it is compulsory to show each different operation separately.
c. PFRS 8 encourages voluntary disclosure of the segments, and it is considered to be
good practice.

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d. The entity should group together various operations and show exploration, production,
and chemicals as one segment and retailing as another segment.
(Adapted)

37. An entity manufactures suits, clothing, bed linen, and various cotton and manmade fiber
products. It has several segments, which are reported internally as
Segments Sales Profit Segment assets
Suits 40% 45% 50%
Shirts 30% 35% 33%
Bed linen 15% 10% 7%
Blinds 8% 6% 5%
Cloth 7% 4% 5%
100% 100% 100%

The table represents the percentages of sales, profit, and segment assets that are attributable
to the different segments. The entity wants to present bed linen and cloth as a single segment
but is wondering whether the information can be aggregated. How will the segmental
information be presented in the financial statements?
a. Bed linen and cloth, suits, and shirts, will all be shown as separate segments with
blinds in the other category.
b. All of the segments should be presented separately.
c. Suits, shirts, and bed linen will be separate segments with blinds and cloth shown as a
single segment.
d. Suits and cloth will be one segment with shirts, bed linen, and blinds shown as other
separate segments.
(Adapted)

38. State the correct sequence of identifying and reporting operating segments in accordance
with PFRS 8.
I. Non-reportable segments are combined and disclosed in an “all other segments”
category.
II. The segments are tested under the quantitative thresholds.
III. Operating segments are identified based on management’s internal reporting system.
IV. Segments that have similar economic characteristics and are similar in a majority of
the respects enumerated in PFRS 8 are aggregated and their combined revenues, profit
or loss, and assets are tested under the quantitative thresholds.
V. Segments that have similar economic characteristics and are similar in all of the
respects enumerated in PFRS 8 are aggregated.
VI. The total external revenues of the identified reportable segments are tested under the
75% limit on external revenues.
VII. Additional operating segments are identified as reportable segments until at least 75%
of the entity’s external revenue is included in reportable segments.
a. III, V, IV, II, VI, VII, I c. II, III, V, IV, VI, VII, I
b. III, V, II, IV, VI, VII, I d. III, II, V, IV, VI, VII, I

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39. Danggit, a company listed on a recognized stock exchange, reports operating results from
its Cebu activities to its chief operating decision maker. The segment information for the
year is:
Revenue ₱3,675,000
Profit 970,000
Assets 1,700,000
Number of employees 2,500

Danggit 's results for all of its segments in total are:

Revenue ₱39,250,000
Profit 9,600,000
Assets 17,500,000
Number of employees 18,500

According to PFRS 8 Operating Segments, which piece of information determines for Danggit
that the Cebu activities are a reportable segment?
a. Revenue b. Profit c. Assets d. Number of employees
(ACCA)

40. The equity of VAPID DULL Company is traded on a recognized stock exchange. VAPID
regularly reports the financial results of five different business units to its chief operating
decision maker. The relevant revenues for the year ended December 31, 20x1 for these five
operations, as a percentage of total external and internal revenue, were as follows:

Business operation % internal % external % total

1 3 35 38
2 10 14 24
3 15 5 20
4 0 9 9
5 0 9 9
28 72 100

In accordance with PFRS 8 Operating segments, the reportable segments of VAPID are
a. 1 and 2 only c. 1, 2, 3 and 4 only
b. 1, 2 and 3 only d. 1, 2, 3, 4 and 5
(ACCA)

41. Are the following statements true or false, according to PFRS 8 Operating Segments?
I. If an entity changes the way it is structured internally so that its reportable segments
change, the comparative information for earlier periods must be restated.
II. Disclosure is always required of the total assets of each reportable segment.
a. False, False b. False, True c. True, False d. True, True
(ACCA)

42. Are the following statements true or false, according to PFRS 8 Operating Segments?

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I. The measurement of the profit or loss to be disclosed for each reportable segment is
defined in PFRS8.
II. The profit or loss disclosed for a segment should relate to the total assets attributed to
that segment.
a. False, False b. False, True c. True, False d. True, True
(ACCA)

43. Are the following statements true or false, according to PFRS 8 Operating Segments?
I. A major customer is defined as one providing revenue which amounts to 10% or more
of the combined revenue, internal and external, of all operating segments.
II. The identities of major customers need not be disclosed.
a. False, False b. False, True c. True, False d. True, True
(ACCA)

44. Which one of the following disclosures is not required under PFRS 8?
a. The total amount of revenues from a major external customer (with revenues from
that external customer exceeding 50% of the entity’s revenues).
b. The identity (say, the name) of a major customer that accounts for 20% of the entity’s
revenues.
c. Revenue from external customers attributed to the entity’s country of domicile and
attributed to all foreign countries in total from which the entity derives revenues
(assuming that necessary information is available and the cost to develop it is not
excessive).
d. Revenues from external customers for each product and service, or each group of
similar products and services, unless the necessary information is not available and the
cost to develop it would be excessive.
(Adapted)

45. PFRS 8 requires that an entity should provide reconciliations of segment information to
the entity’s financial information. One of the following reconciliations is not required by
PFRS 8. Which one is it?
a. The total of the reporting segments’ revenues to the entity’s revenues.
b. The total of the reportable segments’ measures of profit or loss to the entity’s profit or
loss before tax expense (tax income) and discontinued operations, and if the entity
allocates to reportable segments items such as tax expense (tax income), the entity
may reconcile the total of the segments’ measures of profit or loss to the entity’s profit
or loss after those items.
c. The total number of major customers of all segments to the total number of major
customers of the entity.
d. The total of the reportable segments’ assets to the entity’s assets.
(Adapted)

46. Which one of the following statements is not true in the context of PFRS 8?
a. The present PFRS on segmental reporting requires entities to report segmental
information using a “management approach” that allows the financial statement user
to review segmental information from the “eyes of the management.”

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b. The “core principle” of PFRS 8 requires that an entity should disclose information to
enable users of its financial statements to evaluate the nature and financial effects of
the types of business activities in which it engages and the economic environments in
which it operates.
c. If an entity that is not required to apply PFRS 8 (such as an entity whose equity or debt
is not traded in a public market) but still chooses to disclose information about
segments in its financial statements, it shall not describe the information as segment
information.
d. The present PFRS on segmental reporting requires entities to report segmental
information using a “risks and rewards” approach.
(Adapted)

47. Not all operating segments would automatically qualify as reportable segments. PFRS 8
prescribes criteria for an operating segment to qualify as a reportable segment; these are
alternative quantitative thresholds. One of the quantitative thresholds listed below is not a
requirement of PFRS 8. Which one is it?
a. Its reported revenue, from both external customers and intersegment sales or
transfers, is 10% or more of the combined revenue, internal and external, of all
operating segments.
b. The absolute measure of its reported profit or loss is 10% or more of the greater, in
absolute amount, of (1) the combined reported profit of all operating segments that
did not report a loss and (2) the combined reported loss of all operating segments that
reported a loss.
c. Its assets are 10% or more of the combined assets of all operating segments.
d. Its assets are 20% or more of the combined assets of all operating segments.
(Adapted)

48. Which statement is not true with respect to a “chief operating decision maker” as
envisaged by PFRS 8?
a. The term “chief operating decision maker” identifies a function and not necessarily a
manager with a specific title.
b. In some cases the “chief operating decision maker” could be its chief operating officer.
c. The Board of directors (Board), acting collectively, could qualify as the “chief operating
decision maker.”
d. The chief internal auditor who reports to (and takes directions from) the Board usually
plays a very important role in any organization and would generally qualify as a “chief
operating decision maker.”
(Adapted)

49. Regarding disclosure of major customers, which of the following are in accordance with
the provisions of PFRS 8 Operating Segments?
I. A single external customer is considered a major customer necessitating disclosure if
revenues from transactions with that single external customer amount to 10% or more
of an entity’s revenues.
II. The total amount of revenues from each major customer should be disclosed.

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III. The identity of the segment or segments reporting the revenues from major customers
should be disclosed.
IV. The identity of a major customer should be disclosed.
V. The amount of revenues from major customers that each segment reports should be
disclosed.
VI. A group of entities known to a reporting entity to be under common control shall be
considered separate customers, and a government (national, state, provincial,
territorial, local or foreign) and entities known to the reporting entity to be under the
control of that government shall be considered separate customers.
a. I, II, III b. I, II, III, VI c. I, II, III, IV, V d. I, II, III, IV, V

50. Which of the following are included in the disclosures required by PFRS 8 Operating
Segments?
I. revenues from external customers
II. revenues from transactions with other operating segments of the same entity
III. interest revenue
IV. interest expense
V. income tax expense or benefit
a. I and II b. III, IV, and V c. I, II, III, and IV d. all of the choices

51. Which of the following are included in the disclosures required by PFRS 8 Operating
Segments?
I. Depreciation and amortization
II. Material items of income and expense disclosed in accordance with PAS 1
III. The entity’s interest in the profit or loss of associates and joint ventures accounted for
by the equity method
IV. Material non-cash items other than depreciation and amortization.
a. I and II b. III, IV, and V c. I, II, and III d. all of the choices

52. PFRS 8 requires the disclosure of information about major customers if revenues from
transactions with a single external customer amount to
a. 10 per cent or more of an entity’s total revenues from external and internal customers
b. 10 per cent or more of an entity’s total revenues from external customers
c. more than 10 per cent of an entity’s total revenues from external and internal
customers
d. more than 10 per cent of an entity’s total revenues from external customers

53. An operating segment is a component of an entity:

I. that engages in business activities from which it may earn revenues and incur expenses
(including revenues and expenses relating to transactions with other components of
the same entity)
II. whose operating results are regularly reviewed by the entity’s chief operating decision
maker to make decisions about resources to be allocated to the segment and assess its
performance
III. for which discrete financial information is available
a. I only b. II only b. I and II d. all of these

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54. Operating segments are identified using a “management approach,” this means that the
identification of operating segments is
a. based on internal reporting. c. based on quantitative computations
b. based on external reporting d. based on qualitative factors

55. An entity may combine information about operating segments that do not meet the
quantitative thresholds with information about other operating segments that do not
meet the quantitative thresholds to produce a reportable segment only if
a. the operating segments have similar economic characteristics and share a majority of
the aggregation criteria
b. the operating segments have similar economic characteristics and share in all of the
aggregation criteria
c. the operating segments have dissimilar economic characteristics and do not share a
majority of the aggregation criteria
d. an entity should not combine information about operating segments after performing
the quantitative thresholds.

56. An entity may combine information about operating segments before performing the
quantitative threshold tests if
a. the operating segments have similar economic characteristics and share a majority of
the aggregation criteria
b. the operating segments have similar economic characteristics and share in all of the
aggregation criteria
c. the operating segments have dissimilar economic characteristics and do not share a
majority of the aggregation criteria
d. an entity should not combine information about operating segments after performing
the quantitative thresholds.

57. After identifying operating segments based on internal reporting, management must
decide which of the segments should be reported separately.
a. If two or more of the segments have essentially the same business activities in
essentially the same economic environment, information for these individual segments
may be combined (aggregated).
b. If two or more of the segments have essentially dissimilar business activities in
essentially the same economic environment, information for these individual segments
may be combined (aggregated).
c. If two or more of the segments have essentially the same business activities in
essentially the same economic environment, information for these individual segments
shall be reported separately.
d. a or c

58. A retail chain may have 20 stores that individually meet the definition of an operating
segment but each store is essentially the same.
I. In this case management may desire to combine the 20 stores into one operating
segment.

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II. In this case management may desire to combine the 20 stores into one operating
segment described as “all other segments”.
a. I only b. II only c. I and II d. Neither I nor II

59. After identifying reportable segments using “management approach,”

a. additional reportable segments are identified using the quantitative thresholds.
b. conformance with the limit on external revenues is tested.
c. additional reportable segments are identified based on management’s judgment.
d. the remaining segments are described as “all other segments.”

60. If an operating segment does not meet any of the quantitative threshold,
a. it may be combined with other operating segments not meeting the quantitative
threshold and the combined information is treated as reportable if the combined
results meet any of the quantitative thresholds.
b. it may be included in “all other segments”
c. it may nevertheless be reportable if management believes information on this segment
is relevant
d. any of these

61. Assume an entity identified its operating segments as segments A, B, C, D, and E with A and
B as the only reportable segments. The sum of the external revenues of A and B constitutes
less than 75% of the total external revenue of the entity. Which of the following statements
is incorrect?
a. Additional operating segments should be identified as reportable
b. If management judges that of the other remaining segments (C, D and E), information
on segment C will be important to users, then C will be included as a reportable
segment even though it was previously not assessed as reportable.
c. If management judges that C and E should be aggregated, then C and E will be
aggregated and included as additional reportable segment even if their combined
results do not meet any of the quantitative thresholds.
d. Any of these may be acceptable

62. According to PFRS 8, external revenue reported by reportable operating segments must be
at least
a. 75% of the total revenue of the entity including both internal and external revenues
b. 75% of the total external revenue of the entity
c. 10% of the total external revenue of the entity
d. a majority of the total revenue of the entity including both internal and external
revenues

63. Two or more operating segments may be aggregated into a single operating segment if
the segments have similar economic characteristics, and the segments are similar in which
of the following respects:
I. the nature of the products and services;
II. the nature of the production processes;
III. the type or class of customer for their products and services;

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IV. the methods used to distribute their products or provide their services;
V. if applicable, the nature of the regulatory environment, for example, banking,
insurance or public utilities.
a. I, II, or III only
b. I, II, III, and IV only
c. any of I, II, III, IV, or V
d. all of these before 10% tests; majority of these after 10% tests.

64. According to PFRS 8, there may be a practical limit to the number of reportable segments
that an entity separately discloses beyond which segment information may become too
detailed. Although no precise limit has been determined, if the number of segments that
are reportable in accordance with the quantitative threshold reaches this number, the
entity should consider whether a practical limit has been reached.
a. above ten (10) c. below ten (10)
b. above three (3) d. below three (3)

65. The accounting system that permits management to break down segments of a business
into cost centers and to place accountability on those individuals responsible for the
incurrence of these costs
a. operations research accounting c. control accounting
b. responsibility accounting d. budgetary accounting

Chapter 44 - Suggested answers to theory of accounts questions

1. D 11. D 21. A 31. B 41. D 51. D 61. D
2. C 12. A 22. D 32. D 42. A 52. B 62. B
3. D 13. D 23. C 33. D 43. B 53. D 63. D
4. A 14. C 24. B 34. C 44. B 54. A 64. A
5. D 15. D 25. A 35. B 45. C 55. A 65. B
6. D 16. B 26. B 36. C 46. D 56. B
7. C 17. A 27. B 37. A 47. D 57. A
8. D 18. D 28. C 38. B 48. D 58. A
9. C 19. B 29. D 39. B 49. A 59. A
10. B 20. A 30. B 40. B 50. D 60. D

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